Pound Falls After Retail Sales Drop, Paring Best Week This Year

poundPhotographer: Miles Willis
  • Pound Falls After Retail Sales Drop, Paring Best Week This Year

The pound fell against the dollar, paring its biggest weekly gain this year, after data showed retail sales recorded their largest decline in seven years in the first quarter.

Sterling fell as the data showed sales dropped 1.8 percent in March alone, far exceeding the 0.5 percent decline forecast by economists. The losses ate into a second weekly advance versus the dollar, after the U.K. currency had been boosted by Prime Minister Theresa May’s surprise announcement of a snap election on June 8. May’s move was perceived by markets to reduce the prospects of a chaotic exit from the European Union.

  • GBP/USD fell 0.2% to 1.2786, on course for a weekly gain of 2.1%, the biggest since November. GBP/USD reached a more than six-month high on Tuesday
    • Resistance at 1.2860, April 19 high; Support at 1.2728, Dec. 13 high
    • EUR/GBP climbs 0.2% to 0.8383
  • Yield on 10-year gilts decline 2 bps to 1.05%
  • The call for an election in the U.K. has done little to change the EU’s negotiation stance, with Britain being consistently rebuffed by the ruling party in Germany’s administration
    • The snap elections in the U.K. is unlikely to be “fundamentally supportive of sterling. Britain’s bargaining position in its negotiations with the EU is unlikely to improve, even on the back of a more unified stance by the U.K. government,” analysts at UniCredit Bank AG write in a client note
    • The pound is likely to struggle due to the weakening economic outlook and the uncertainty around the Brexit talks, UniCredit analysts say, adding that the recent sell-off in EUR/GBP is a “good buying opportunity. In our view, the bounce in sterling is a result of a short squeeze rather than a structural, long-lasting shift”

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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